Sunday December 29, 1991


********** CORRECTION/CLARIFICATION DECEMBER 30, 1991 **********

The Sunday Journal reported incorrectly yesterday that fugitive banker Joseph Mollicone Jr. had paid for vacations of Robert I. Weisberg. Weisberg says he made it a point to pay his own expenses when accompanying Mollicone. The Journal regrets the error.

****************** END OF CORRECTION/CLARIFICATION ******************

Part two of two parts.


Written by Staff Writer Dean Starkman and is based on reporting by him, Dan Barry, John Sullivan, Tracy Breton and Ira Chinoy.

Act IV: The Other Side

But the glittering life had an ugly side.

Mollicone's mania for deal-making took its toll on his staff. His erratic moves frequently drove his property manager, Diana C. Dumin, to tears. His accountant, Stephen R. Zito, anguished over books that would not balance. His bank vice president, Peter J. Iannuccilli, scrambled to keep up with his frenetic boss.

Heritage Loan had always had its quirks. But without Puppy Dog's disciplined hand, the bank just went to hell.

Every few days, prosecutors say, David Izzi and Kenneth Saccoccio of Cranston carried in suitcases crammed with $10s, $20s and $50s. The bills were sometimes covered with cocaine residue. A bank employee would take the money downstairs, count it and send a check to a metals company.

The money was from drug sales on the streets of America. The notorious Cali drug cartel used Heritage and a string of businesses around the world to help obscure the money's origins.

Prosecutors would later charge that Mollicone, Iannuccilli and Raymond Marotto, a branch manager, were members of an international money-laundering ring .

Mollicone personally went out of his way to help underworld figures. In 1989, Raymond A. Lyons, who prosecutors say ran a $20 million bookmaking ring for organized crime, applied for a loan. But instead of simply filling out an application, the 60-year-old bookmaker sent Mollicone a confidential letter listing assets that he didn't want anyone else to know about.

"This info is quite sensitive and only for your eyes," Lyons wrote.

The list included a Mercedes Benz ("mint, collector's item"), 1 1/2 acres in Lincoln's Bridlewood Estates, 75 acres of Maine waterfront and other assets, all worth more than $1 million. Lyons has never held a job, state police say.

"There are many other assets I didn't bother to list," Lyons wrote. "I'll catch you soon so we can talk."

Mollicone also took care of a mysterious savings account linked to the Laborers Union, one of Rhode Island's largest labor organizations.

The money, $420,000, was held in the name of the North American Laborers Defense League, a successor to a group established in 1980 to defend union members against investigations and criminal charges.

In 1981, the league called for rank-and-file contributions to bolster the account to help two union executives defend themselves in a federal racketeering case in which Patriarca was a co-defendant.

In 1988, the league opened a $280,000 account at Heritage to accept contributions from Rhode Islanders. The account earned no interest, according to bank records. Its passbook was locked in the vault at Heritage and could be used by only three people: Charles J. Rogers Jr., a one-time lawyer for Patriarca; Msgr. Galliano Cavallaro, a priest who vouched for Patriarca at a parole hearing; and Dr. Albert Piccozzi, a North Providence dentist who died this year.

No one contributed to the account for two years. But in July 1990, the League deposited $140,000, according to the passbook. In October, investigators believe, Mollicone stole $415,000 from the account.

After the collapse of Heritage, examiners contacted the Laborers Union about the money, because the passbook bore the name of "Arthur Coia." Arthur E. Coia, and his son, Arthur A. Coia, are both high-ranking Laborers executives who were charged and acquitted in the 1981 racketeering case.

The union denied that it, or Coia, had anything to do with the money.

However, both Rogers and Msgr. Cavallaro told the Journal-Bulletin that the Defense League was a "review board" and that the money came from the Laborers Union.

Union executives have declined to discuss the account.

But the account was far from the bank's strangest feature.

The bank's gesture toward internal security was to require two signatures on its checks. But Mollicone simply had a rubber stamp made of the signature of George N. Marzilli, the bank's affable treasurer of 30 years. As business debts mounted, Mollicone used the rubber stamp more and more.

He wrote checks from the bank to his own companies, starting with a few hundred thousand dollars in 1985, increasing to $2 .3 million the next year, and rising to a total of $21 million by 1990.

Mollicone phoned daily to inform his tellers how much he had written to his own companies. They referred to the figure as "Joe's number."

When the number got too big, Mollicone simply drew up loan papers in his friends' names.

Mollicone's looting of Heritage was underway by 1987, investigators have concluded. But he could have been stopped that year, and the banking crisis four years later possibly averted.

On April 20, two officials from the state Department of Business Regulation walked in for a "surprise" bank examination. Led by Dennis Ziroli, a veteran examiner, they didn't care much about Mollicone's nice clothes or good manners.

Mollicone smiled and greeted them cordially. He was glad to see them, he said, but there was a problem. He gestured sheepishly to wheelbarrows, scaffolding and drop cloths lying on the floor.

"Construction," he said.

He said he had just arranged to fix up the bank - wouldn't you know? - and he wondered if the examiners could return in a couple of weeks.

Ziroli called his bosses, who told him to delay. The examiners left, reluctantly. They suspected a tip-off, and they were right. Mollicone told friends later that he had known about the surprise audit ahead of time.

The delay was fatal. Mollicone had already embezzled at least $2 million from Heritage, investigators say, and he used the extra three months to concoct $ 2 million in phony loans.

But that was not enough to fool the examiners into thinking the bank was healthy. By that point, Heritage was dangerously depleted of cash reserves to back up its deposits. Actually, investigators say, the bank was insolvent and should have been closed, even then.

Mollicone turned to Fleet.

He applied for a $3.5 million, short-term loan. He told Michael Patch, the commercial loan officer, that he needed the money to pump up the balance sheet to make the bank more attractive to potential investors.

Fleet approved the loan.

Mollicone used the money to buy a Fleet certificate of deposit in Heritage's name.

When Ziroli returned, Mollicone showed him the $3.5 million CD. He didn't tell the examiner that the money was just a loan. Instead, he showed him a CD statement from Fleet, which said nothing about the origins of the money.

When the examination was over, Mollicone paid back Fleet and tossed the loan records in a box in the basement.

Fleet says it didn't know Mollicone was going to use the loan to fool the state examiners. The bank's spokesman said the loan was a "perfectly good and legitimate transaction." The bank has declined to discuss the loan in detail.

But even with the subterfuge, Ziroli's team wrote a scathing review of Heritage for his superiors - Susan D. Hayes, the recently promoted banking superintendent, and Mark A. Pfieffer, the director of business regulation, whom DiPrete would later make a judge.

The examiners wrote that Heritage, even with the $3.5 million from Fleet, didn't have enough cash on reserve. They said Heritage's loans were dangerously delinquent, that its records were sloppy and that Mollicone was inattentive. They recommended that Mollicone find a banker to run Heritage.

Mollicone told the examiners they were right. He said things would change.

And that's where it ended.

An enduring mystery of the Rhode Island banking crisis is why the state waited three years to return to Heritage. The 1987 exam was fair warning. The annual reports the bank sent to DBR showed wild swings in the types of loans Heritage claimed it was making.

The state regulators, who promised a followup exam, never returned.

Ziroli says he was reassigned.

Mollicone had escaped a close call, but the crack-up continued.

He started showing signs of stress. He spoke incessantly about his weight, his diet, his cholesterol, his aching back. He never failed to mention if someone had gotten sick or died. He liked to be near his doctor friend, Ed Iannuccilli.

His friends remarked that he was always distracted. They became impatient when he evaded questions about investments. Only when one got stern did he come up with money, or even a straight answer.

There were other ominous signs. In a single week in November, 1989, both of Mollicone's bank branches were burglarized, and two of his cars were stolen. Mollicone wondered if he had a problem with organized crime. He talked it over with "Baby Shanks" Manocchio, who frequently visited the bank to chat behind closed doors.

When state troopers visited to ask about the breaks, Mollicone mentioned his discussions with Manocchio and said he didn't need police help.

But even more foreboding was the sinking real estate market.

By 1989, Rhode Island's go-go era had ground to a halt. No one wanted to buy his office condominiums, subdivisions and houses. Except for the state, no one wanted to rent his office buildings.

Suddenly, Mollicone had a dwindling supply of cash to cover his huge monthly payments to banks and credit unions and to cover mounting losses at Ronzio pizza, Pub Dennis of Cumberland, and other business failures.

Worse, credit had dried up. Banks, which had their own problems, refused to wait or make new loans to cover payments until times got better. Fleet even demanded more collateral to cover old loans, including a $500,000 personal line of credit. Mollicone put up his house on Blackstone Boulevard.

For whatever reason, investigators say, Mollicone's looting of Heritage accelerated to a furious pace. He robbed everyone, including his friends and Fleet. Some of the money kept his creditors at bay, investigators say, but much of it vanished.

In 1989 alone, he wrote $7 million in checks to his own companies. He stole from the Laborers defense fund. He sold silver bars that a customer had stored at the bank.

He sold Atrium loans to both RISDIC credit unions and Fleet.

Mollicone's tactics weakened the entire RISDIC system and almost singlehandedly ruined Providence Teachers, the credit union run by his friend Joseph Bellucci.

Act V: The Last Deal

By the summer of 1990, the world was closing in. Word got out that Mollicone was bouncing checks. The news set off alarms at the state banking division.

In June, a state DBR examination was averted when Bellucci ordered RISDIC to send in a team of its own. Bellucci turned to Kenneth Proto, vice president for examinations.

As it happened, Proto owned 1,000 shares of stock in Ronzio Inc., Mollicone's company. That fact, Proto says, did not compromise his regulatory responsibility.

Through the summer, RISDIC examiners unearthed more about Mollicone's theft. They told their bosses, including Bellucci, but Mollicone continued business as usual. Investigators say that included falsifying loans, looting accounts and laundering cash for the Cali cartel.

In the middle of his financial woes, Mollicone tried to cut another deal: a plan to lease video poker machines to Native American reservations in Minnesota.

In August, Mollicone watched a slide show at his house about the machines and the Minnesota reservations. There were meetings at the Capital Grille and at Toscano's, on Federal Hill.

Mollicone decided to take a piece of the action, along with his friend Ricci and millionaire Paul Anjoorian. The three pals decided to chip in about $67,000 each.

But, Anjoorian says, "Joe Mollicone never came up with 10 cents."

In fact, Mollicone cashed a $7,000 check he received from the partnership that was meant to pay for taxes.

By October, the DBR was brought into Heritage and threatened to close it.

Mollicone had one last hope: his friends.

In Pine Street Realty, he had two well-placed partners, Henry Fazzano, DiPrete's chief of staff, and Rodney Brusini, DiPrete's friend.

For the past two years, the state had provided Mollicone's only good news: seven state leases. The partnership was on the verge of putting the last piece of the puzzle in place.

The partners had to get the state to rent one more floor of the Pine Street Realty building. The move would satisfy a foreign bank that had agreed to give the group a $9 million final loan.

Fully rented, with the loan sealed, the building would be worth $12 million. The foreign bank, the Banca Commerciale Italiana, had set the deadline for closing: Nov. 20, 1990.

At first, the state seemed ready to move, but in November, things fell apart.

On Nov. 1, Mollicone was summoned to a meeting with Fred Franklin, the state director of Business Regulation, along with the state attorney general, and other officials. If the state closed Mollicone's bank, Pine Street Realty's closing would go up in smoke.

That morning, Fazzano called Franklin and told him to be "your usual polite self" in dealing with Mollicone.

Mollicone's performance at the meeting was not heartening. He was barely coherent. Franklin, however, reversed course and decided to keep Heritage open.

For Mollicone, one crisis was averted.

But then came a second one. A state official, Henry S. Woodbridge Jr., was balking at all the pressure from above to move his staff into Mollicone's building.

His refusal jeopardized the closing deadline set by the Cayman Island branch of the Banca Commerciale Italiana.

Woodbridge got an angry call from Mathies Santos, one of the governor's aides and a Heritage borrower, who screamed at him to get on with the move. Then Fazzano himself called and ordered him to move.

Woodbridge didn't budge.

Other complications arose. The Pine Street Realty partners had grown suspicious of Mollicone, who was chronically late with his contributions. They told Mollicone to meet them - with some money - on Nov. 8. Perhaps things could still be straightened out.

Mollicone apparently didn't think so. Early that morning, his son drove him to Logan Airport, and he disappeared.

When Mollicone didn't show up for the meeting, the partners were furious. The closing was blown. Worse, they discovered Mollicone may have stolen from them. Now, they were livid. One of them, Robert Weisberg, drove to Mollicone's house and asked his wife where Mollicone was. She didn't know.

The state closed Heritage. Its depositors learned their accounts had been looted. Two of its employees learned they would be arrested. The underworld saw its secrets exposed. Political figures saw their ties to Mollicone become public.

His fellow RISDIC board members found their insurance fund drained, and their credit unions finished. Hundreds of thousands of Rhode Islanders were told they couldn't get to their money. "Mollicone" was on everyone's lips. An entire state cursed his name.

The Rhode Island life was done.


After Mollicone disappeared, the state police and federal agents set out to find him. They interviewed family, friends, business partners - dozens of people.

One day they visited Anthony V. Arico Jr., the state deputy director of business regulation. They wanted to know if Mollicone, after disappearing, had contacted Arico.


"Completely false," Arico says.

The deputy director acknowledges that he spoke with Mollicone several times during the summer and early fall of 1990, before the banker left. He explains that he was not deputy director that summer; he had been transferred to another department.

Arico, who has since rejoined DBR, says his conversations had nothing to do with Mollicone's bank, or with state business. Arico was trying to earn some side money - "a finder's fee" by calling Mollicone on behalf of friends who were architects.

"They asked me," the deputy director says, "if I knew anyone who was in a position to dole out any business."

* * *

The inside story

A $3.5 million loan from Rhode Island's biggest bank helped Mollicone cover up his embezzlement, investigators say.

A prominent politician borrowed $100,000 from a Mollicone company and didn't repay it until bank examiners stepped in.

Under DiPrete's administration, Mollicone and partners were awarded state office leases worth $24 million over 10 years.

Mollicone handled a mysterious savings account linked to one of Rhode Island's biggest labor organizations.

A bookmaker with ties to organized crime asked Mollicone for a loan based on assets he sought to conceal from authorities.

A key RISDIC regulator held 1,000 shares of stock in Mollicone's pizza business.

Mollicone made his reputation as a developer on a project marred by accusations of bid-rigging and private deal-making with a Providence mayor.

The FBI taped business conversations between Mollicone's father and late New England crime boss Raymond L.S. Patriarca..

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